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5/24/2010
The FCC recently released a Notice of Proposed Rulemaking (“NPRM”) proposing to revise and streamline its Part 17 rules regarding construction, marking, and lighting of antenna structures. Pursuant to the Federal Register publication that occurred today, Comments are due on July 20, 2010, with Reply Comments due on August 19, 2010.

According to the FCC, the NPRM’s proposed rule changes are intended to improve safety for pilots and airplane passengers while also “updating and modernizing” the rules by removing outdated requirements currently included in Part 17 of its Rules. The FCC states that the proposed clarifications and amendments to the Rules will allow antenna structure owners to more efficiently and cost effectively ensure rule compliance. The NPRM is largely based upon a Petition for Rulemaking filed by the Wireless Infrastructure Association seeking changes to Part 17 of the Rules.

The FCC’s rules require owners of antenna structures (rather than the FCC licensees and permittees utilizing those structures) to register certain types of antenna structures with the FCC and to exercise primary responsibility for complying with the appropriate painting and lighting requirements. In general, any proposed or existing antenna structure that is more than 200 feet above ground level (60.96 meters) requires notice of construction or alteration to the Federal Aviation Administration (“FAA”) and must be registered with the FCC.

Among other things, the FCC’s NPRM requests comment on the proposed rule changes outlined below.

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5/18/2010
Prepaid “cards, codes and other devices” redeemable solely for telephone services are exempt from a new federal law that goes into effect August 22, 2010. However, if they can also be redeemed for related technology services, these products will (at least in most instances) be subject to provisions restricting fees, prohibiting expiration in less than five years, and imposing strict disclosure requirements if fees are charged or the products expire.

On March 23, 2010, the Federal Reserve Board (“Board”) issued its Final Rule implementing Title IV of the federal Credit Card Accountability, Responsibility and Disclosure Act of 2009, which was signed into law by President Obama on May 22, 2009 (collectively, the “CARD Act”). The CARD Act amends the federal Electronic Funds Transfer Act (EFTA), and the Final Rule amends the EFTA’s implementing regulation, Regulation E. It takes effect August 22, 2010. It applies to prepaid card products sold to a consumer on or after August 22, 2010, or provided to a consumer as a replacement for such product. State laws that are consistent with the CARD Act are not preempted, which means the CARD Act provides a minimum floor. State laws that provide greater protection for consumers are not inconsistent with the CARD Act.

The CARD Act restricts most fees and expiration dates on prepaid cards, and requires various disclosures if fees are charged or the products expire. This Advisory, one of several Advisories on the CARD Act, focuses on the exemption for cards, codes and other devices useable solely for telephone services (referred to collectively as “Prepaid Calling Cards”).1 Companies that offer or issue Prepaid Calling Cards may be surprised to learn that if these products are also redeemable for related technology services, they will not qualify for this exemption. All persons involved in issuing or distributing Prepaid Calling Cards should review and potentially revise their disclosures, as well as their redemption policies and procedures.

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5/17/2010
The long strange trip of the Satellite Television Extension and Localism Act (“STELA” for short) seems finally to be ending. After satellite carriers’ ability to import distant broadcast signals into stations’ local markets expired on December 31, 2009, Congress passed a number of short-term extensions of the predecessor law, SHVERA. The Senate passed three different versions of the bill since late 2009. The House, with a lightning fast voice vote, accepted the Senate’s last version unchanged and sent the legislation to the White House for a signature from the President. The President is expected to sign the bill shortly.

Reauthorization of Distant Signal Carriage For Five Years
STELA reauthorizes the provisions of SHVERA which allow satellite carriers to offer the signals of network stations from other markets to subscribers unable to receive their local network-affiliated stations over the air. It also updates the law to reflect the transition to digital television.

Expansion of Distant Signal Carriage Rights of Satellite Providers
A number of subtle revisions to the existing distant signal carriage provisions work together to increase the area into which satellite operators can import distant signals, and conversely, the area in which a local broadcaster can enjoy exclusive rights in the programming for which it has contracted with its program suppliers.

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The U.S. Supreme Court today announced that it is declining to hear Cablevision’s challenge to the must-carry rules, letting stand a Second Circuit ruling upholding the validity of the 1992 rules. Approximately 40% of broadcast stations rely on must-carry to ensure carriage on their local cable systems, with the remainder electing to negotiate retransmission terms for carriage. A closely divided Supreme Court affirmed the validity of the must-carry rules over a decade ago, but Cablevision sought to argue that things have changed since the days of cable monopolies, and that the rules can’t be justified in a world where cable now competes with satellite and other providers for subscribers. However, the real change that Cablevision was banking on was the change in the composition of the Court, with two of the five justices that voted to affirm must-carry in 1997 having left the court, and a third affirming vote, Justice Stevens, having now announced his impending retirement.

Cablevision therefore had reason to think that its appeal, which in many regards was just a “do over” of the earlier unsuccessful challenge, had a chance with the Court’s new mix of justices. What is interesting, and reassuring for broadcasters, is that for the Supreme Court to agree to hear an appeal requires the votes of only four justices, rather than a majority of the nine justices. Declining to hear the appeal means that not even four justices, much less a majority of the court, were interested in reviewing the Second Circuit’s affirmation of the must-carry rules.

So what does that mean? Well, a true optimist from the broadcasters’ perspective would hope it means that three or less justices question the validity of the must-carry rules, and that future appeals will have a very uphill battle to claim five votes in favor of overturning the rules. An optimist for the cable industry would argue that a lot of factors go into determining whether the Court should grant certiorari, only one of which is the likelihood of a resulting decision reversing the lower court. The truth, of course, lies somewhere in the middle, and we may never find out whether the Court’s decision to deny certiorari was a hard-fought internal battle over the merits of the appeal, or merely a simple vote where the justices expressed no appetite for revisiting the issue for any number of reasons.

In the meantime, must-carry remains the law of the land, and it will likely be a while before another appeal can work its way up through the system to reach the Supreme Court. As a result, broadcasters relying on must-carry rights can breath a sigh of relief, at least for now.

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Call it just a recessionary recess, but radio stations strapped by the tough (but finally improving) advertising market breathed a sigh of relief today. In a continuing battle between the Radio Music License Committee (RMLC) and ASCAP over the music license fees paid by radio stations to the composers represented by ASCAP, US District Court Judge Denise Cote ruled that while the dispute is being resolved, the interim payments due ASCAP will be reduced by some $40 million dollars compared to the 2009 ASCAP fees.

The seeds of the dispute were first planted years ago, in economic boom days, when ASCAP fees were based upon a percentage of a radio station’s revenues. The radio industry sought to slow the rapid rise in ASCAP fees resulting from economic growth in the radio industry. To accomplish this, the RMLC and ASCAP ultimately agreed on a flat rate fee structure not directly connected to station revenues.

You can guess what happened next. The economy plummeted, radio revenues plummeted, but the ASCAP flat rate fees did not. Suddenly those fees represented an ever larger percentage of station revenue, with the result that playing music was becoming a very pricey part of station operations. There are also additional complications in a digital world. Does your ASCAP license cover your station’s audio stream on the Internet and elsewhere? How about those new HD multicast streams you’re now transmitting?

With the hope of addressing the growing impact of ASCAP fees, as well as these related issues, the RMLC and ASCAP entered negotiations over the fees to be paid by radio stations in 2010 and beyond. When no agreement could be reached, the RMLC commenced a rate proceeding in the US District Court. While it may be years before that proceeding is concluded, the interim rate set by Judge Cote represents the rate that will apply going forward. It supersedes the temporary 7% rate reduction agreed to by the RMLC and ASCAP earlier, but is not retroactive to January 1, 2010. It will continue to apply until the rate proceeding is concluded and a new rate is established, at which point the new rate will be applied retroactive to January 1, 2010, and any upward or downward adjustment for fees already paid will be made.

In the meantime, radio stations should begin seeing reductions in their ASCAP bills in the coming months, which will provide a welcome bit of relief to cash-strapped stations.

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While the FCC has traditionally steered clear of copyright issues, that has grown more difficult as the preferred method of content protection shifts from court actions to copyright protection built into the hardware. The FCC therefore found itself in the middle when Hollywood insisted that cable and satellite set-top boxes be designed so that programming could be embedded with code preventing the box from outputting the programming through any output unsecured against copying (principally analog outputs). Consumers and consumer electronics manufacturers fought back, noting that early generation DTV sets only had analog inputs, and that allowing programming to be restricted to the digital outputs of set-top boxes would deprive those early adopters of programming unless they bought new DTV sets.

In balancing the desire of Hollywood for an ironclad grip over its programming, and the adverse impact upon consumers just as the FCC was trying to persuade them to transition to digital television, the FCC prohibited the use of Selectable Output Control (SOC), but did not prohibit set-top boxes from being manufactured with SOC capability. The idea was that the FCC might later be presented with a business model requiring the use of SOC, and the FCC did not rule out the possibility of granting a waiver if the applicant could demonstrate that consumers would not be harmed by the use of SOC.

The FCC today released a decision partially granting a waiver request from the MPAA that would allow cable and satellite companies, at the request of the program provider, to use SOC to prevent set-top boxes from outputting recent theatrical HD movies over “unsecured” outputs. The business model proposed in the waiver request is the release of movies through Video on Demand services while those movies are potentially still in theaters, and long before they become available on DVD or Blu-Ray disc. The MPAA persuaded the FCC that studios would never release their content to home viewing this early in a film’s marketing life unless assured that it wouldn’t result in the content immediately being pirated over the analog outputs of set-top boxes.

In addition to the traditional opposition from consumer electronics manufacturers, who will face the wrath of consumers unable to get their components to work with the restricted outputs, the National Association of Theatre Owners (NATO) also objected. They argued that such an early release model would undercut their business, and that “instant availability of films will reduce choice and limit the ability to develop ‘sleeper’ hits in movie theaters.” Similarly, the Independent Film and Television Association (IFTA) asserted that SOC would reduce access to independently produced films.

The FCC chose, however, to grant a waiver, stating its belief that “home viewing will complement the services that NATO and IFTA members offer and provide access to motion pictures to those consumers who cannot or do not want to visit movie theaters.” While the FCC has long claimed not to be in the business of picking winners and losers in its technology decisions, that loud groan you hear is theater owners concerned that they are about to be “complemented” out of business by an ever-improving (and now speedier) home viewing experience.

In an effort to prevent SOC from being abused, however, the FCC did not grant the open-ended waiver sought by the MPAA. For example, the FCC limited the time during which SOC restrictions can be applied to 90 days, or whenever the movie becomes available on prerecorded media, whichever comes first. It also prohibited SOC from being used to promote proprietary connections (by blocking output to acknowledged copyright-secure connections on retail devices in favor of a Hollywood-preferred connection). The FCC also made clear that if “companies taking advantage of this waiver market their offering in a deceptive or unpredictable manner that does not allow consumers to ‘truly understand when, how, and why SOC is employed in a particular case’,” the FCC “will not hesitate to revoke this waiver.”

Finally, to prevent MPAA members from gaining an unfair advantage over other movie producers, the FCC is making the waiver available to any provider of first-run theatrical content that files an “Election to Participate” with the FCC. Such providers will be required to submit a detailed report to the FCC on their use of SOC two years from commencing use of SOC under the waiver so that the FCC can later assess whether the waiver needs to be modified or terminated. Whether the FCC will actually revisit the decision remains to be seen, but keeping its options open is likely a wise idea, as this is a decision that could well have cascading unintended consequences for all involved.

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The press is buzzing with news, leaked late yesterday and announced today in a document entitled The Third Way: A Narrowly Tailored Broadband Framework, that FCC Chairman Genachowski is proposing to reclassify the transmission component of broadband Internet access as a “telecommunications service” subject to FCC regulation. As almost everyone in the telecom world knows, the US Court of Appeals recently found that the FCC does not have direct jurisdiction to impose “network neutrality” rules as long as it classifies broadband as just an “information service.”

With the Chairman’s support, three of the five FCC Commissioners now favor reclassifying broadband as a telecommunications service, a first step towards adopting network neutrality rules.

For broadcasters, the net effect of net neutrality rules isn’t as easy to assess as it may at first seem. As producers and distributors of broadband and mobile services, net neutrality rules should assure broadcasters that their content will not be blocked or unfairly degraded by broadband network operators. Broadcasters that provide mobile news apps and operate rich media web sites have the same general interest in nondiscriminatory network access as do Internet behemoths like Google, Amazon and eBay.

On the other hand, broadband providers have argued convincingly that their networks are extremely expensive to build and that they must have flexibility to manage Internet traffic on their networks to assure a good quality of service to their subscribers. If the FCC limits broadband operators’ ability to manage traffic, those operators may have to upgrade their infrastructure, raising costs to web publishers and end users alike.

Mobile network operators assert that network neutrality rules could have proportionally greater adverse effects on them. Mobile network capacity is generally more costly and less robust than that of copper and fiber networks. If network neutrality rules increase the load on mobile networks and limit the ability of network operators to manage that traffic, their arguments that they need more spectrum to meet growing demand may be more convincing.

At this stage, no one knows how any proposed network neutrality rules would treat mobile broadband operators. However, it is plausible that aggressive network neutrality rules could increase the load on mobile networks, and mobile operators are sure to argue that they will need more spectrum to respond.

With broadcast spectrum already squarely in the sights of the same FCC that is now proposing to impose network neutrality rules, broadcasters should pay close attention to this debate.

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The staggered deadlines for filing Biennial Ownership Reports by noncommercial educational radio and television stations remain in effect and are tied to their respective anniversary renewal filing deadlines.

Noncommercial educational radio stations licensed to communities in Michigan and Ohio, and noncommercial educational television stations licensed to communities in Arizona, the District of Columbia, Idaho, Maryland, Nevada, New Mexico, Utah, Virginia, West Virginia, and Wyoming, must file their Biennial Ownership Reports by June 1, 2010.
Last year, the FCC issued a Further Notice of Proposed Rulemaking seeking comments on, among other things, whether the Commission should adopt a single national filing deadline for all noncommercial educational radio and television broadcast stations like the one that the FCC has established for all commercial radio and television stations. That proceeding remains pending without decision. As a result, noncommercial educational radio and television stations continue to be required to file their biennial ownership reports every two years by the anniversary date of the station’s license renewal filing.

Should there be any questions concerning this matter, please contact any of the attorneys in the Communications Practice.

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When the U.S. Supreme Court overturned various restrictions on political spending by corporations in the Citizens United decision, it set off a flurry of activity in Washington. Many, including famously the President in his State of the Union address, derided the decision as opening the political process to the corrupting influence of corporate cash. Many in Congress promised a swift legislative response to minimize the impact of the Court’s ruling. Regardless of where you stand on the Court’s decision, I have to say I was disturbed by a number of statements coming out of Capitol Hill afterwards which made clear that the speakers had no understanding of the laws already on the books relating to political advertising on electronic media. Some promised to change the law to what it actually already is (although they apparently didn’t know it), and others pointed out “problems” that would result from the Citizens United ruling that current law already prohibits from occurring.

Grandstanding without basis is, however, a well-established Washington tradition, and I presumed that when legislative staffers got together to draft the legislation, they would quickly figure out that these criticisms and unneeded solutions had been off-base. I apparently was too optimistic. Today, Senator Schumer of New York unveiled the Senate version of the legislation (Senate link not yet available) at a news conference on the steps of the Supreme Court. The President publicly applauded the legislation, and the House has promised hearings within a week on its version of the bill in hopes of enacting it quickly enough to govern this Fall’s elections. The DISCLOSE Act (the acronym for “Democracy Is Strengthened by Casting Light On Spending in Elections”), as its name indicates, requires ample disclosure when corporations or unions spend money on ads relating to a federal political campaign. Unfortunately, it does not stop there, and attempts to then rewrite political advertising laws contained in the Communications Act of 1934 that were not impacted by the Citizens United ruling. These changes appear to be an effort to require broadcasters, as well as cable and satellite operators, to subsidize the ads of not just candidates, but of their national political parties as well, in an effort to make their ad dollars go farther than those of a corporation exercising its rights under Citizens United.

Setting aside the wisdom or constitutionality of that approach, the rub is that the legislation was apparently drafted in such a rush that aspects of it quite literally make no sense. For example, the relevant section of the bill is entitled “TELEVISION MEDIA RATES”, but it then amends the political advertising provisions of the Communications Act that affect both television and radio. Even if the impact on radio was unintended, the matter is further confused by a requirement that the FCC perform random political audits during elections of at least 15 DMAs of various sizes, and that each DMA audit include “each of the 3 largest television broadcast networks, 1 independent television network, 1 cable network, 1 provider of satellite services, and 1 radio network.”

Similarly, the statutory exceptions to the requirement for providing equal time to a candidate’s opponents when the candidate appears on-air would be amended to exclude certain appearances by a candidate’s representative as a triggering event. However, since only the appearance of a candidate can trigger equal time in the first place, creating an exception for appearances by a candidate’s representative serves no purpose.

Further indicating that the bill is premised on a misunderstanding of the current law, the Reasonable Access provisions of the Communications Act would be amended so that instead of FCC licensees being required to provide federal candidates with “reasonable amounts of time,” they would be required to provide “reasonable amounts of time, including reasonable amounts of time purchased at the lowest unit charge ….” The premise of this change appears to be a lack of understanding that all time sold to a candidate in the 45 days before a primary and the 60 days before a general election must be sold at the lowest unit charge for that class of time. The broadcaster has no discretion to charge anything but the lowest unit charge during that time, making this change pointless as well.

A number of other odd provisions in the Senate version of the bill that would significantly impact media companies (and not just broadcasters) is discussed in an Advisory we issued to our clients earlier today. Two of particularly great concern would drastically reduce the lowest unit charge for political advertising while significantly expanding the pool of entities eligible to receive lowest unit charge. It is worth noting that none of these media-oriented provisions appear to be in the House version of the bill, so hopefully they will be excised from the Senate bill before any harm is done. Regardless, broadcasters, as well as cable and satellite providers, need to be vigilant to ensure that these provisions, if not eliminated outright, are at least heavily modified before any final bill emerges.

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April 2010
Recent FCC enforcement actions reported in this month’s Enforcement Monitor include:

  • FCC Issues $30,000 and $12,000 Fines to Three Co-owned Commercial Television Stations and Three Co-owned Class A Television Stations for Failure to Publicize the Existence and Location of Their Quarterly Children’s Television Programming Reports
  • FCC Fines Nonresponsive Texas Cable Operator $38,000 for Emergency Alert System and Antenna Structure Violations
  • FCC Fines Broadcasters $7,000 for Failure to Timely File License Renewal Applications and for Unauthorized Operation
  • Idaho Station Fined $4,000 for Failure to Fully Disclose All Material Terms of a Contest

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